T-Mobile and Sprint continue to throw billions of dollars at their respective 5G network launches, with both likely to hit the higher end of capex guidance for their current fiscal years. This spending spree comes as both need to remain competitive in the market against each other — and larger rivals — and also prepare to merge operations.
During its second quarter 2018 conference call with investors this week, T-Mobile CEO John Legere said the carrier was set this year to spend around $5.3 billion in capex as it races to boost its network capabilities and reach. That amount is at the high end of previous capex guidance for the carrier.
Legere said the carrier’s mobile 5G plans include launching services in 30 cities by the end of this year, starting with New York, Los Angeles, Dallas, and Las Vegas. Coverage will expand nationwide in 2020.
That expansion will also fuel T-Mobile’s plans to offer a fixed 5G service to provide broadband service in rural markets. T-Mobile COO Mike Sievert told investors the carrier would be able to provide at least 100 Mb/s service to 62 percent of the country within three years.
“We’re not going to get into right now what markets are where, but we’re going to bring a level of competition to this market that’s very serious and that the industry has not seen and it’s a market that needs competition very badly,” Sievert said.
T-Mobile’s coverage claims are boosted by its plans to use its 600 MHz spectrum licenses to initially roll out services. This spectrum provides far greater reach and ability to penetrate buildings than the millimeter wave (mmWave) spectrum that Verizon and AT&T have been touting for their initial 5G deployments. This basically means that T-Mobile can use fewer cell sites – and most likely traditional cell sites that are already deployed – instead of the hundreds of smaller cell sites required for mmWave spectrum.
T-Mobile CTO Neville Ray did note that the carrier would also layer in mmWave spectrum in urban markets. The depth of that spectrum will be necessary in order to deliver the real speed and capacity advantages of 5G.
However, despite the coverage claims, basically all carriers agree that customers will not be able to tap into these new networks with actual devices until sometime next year.
For its latest quarter, T-Mobile posted a 3.5-percent increase year over year in net income to $10.6 billion. Net income surged a more robust 35 percent to $782 million.
Sprint Capex Ramp
Sprint, on the other hand, spent less on capex during its most recent quarter compared to the previous year, though did increase spending sequentially. That year-over-year lag is expected to be short-lived.
During its most recent quarterly conference call, Sprint CFO Andrew Davies said the carrier spent $1.1 billion on capex in its first fiscal quarter of 2018. However, he added that the carrier will ramp up spending as the fiscal year progresses, hitting between $5 billion and $6 billion for the full year as it prepares for its 5G launch. That would be nearly double the $3.3 billion in capex Sprint spent in its fiscal 2017.
CEO Michel Combes reiterated that the carrier is focused on “mobile 5G” with plans to provide commercial services and devices during the first half of 2019. Those initial markets include New York City; Phoenix; Kansas City, Kansas; Atlanta; Chicago; Dallas and Houston, Texas; Los Angeles; and Washington, D.C.
Specific to those plans, Sprint CTO John Saw said that the current deployment push around advanced massive multiple-input multiple-output (MIMO) antenna technology was laying the groundwork for 5G deployments. Saw previously noted that the carrier had released $1 billion in purchase orders primarily for equipment related to its MIMO deployment.
Sprint remains focused on using its deep 2.5 GHz spectrum licenses to support its initial 5G launch. The carrier has been working for years to deploy support for that spectrum on its traditional cell sites and on newly deployed small cells. Saw said the carrier had deployed support to two-thirds of its traditional cell sites and 15,000 small cells.
For its latest quarter, Sprint reported a slight year-over-year dip in revenues at $8.1 billion. That slight dip along with a small increase in expenses dropped net income from $206 million reported last year to $176 million this year.
A recent Strategy Analytics report predicted that a combined T-Mobile and Sprint will result in a 17-percent surge in the uptake of 5G services by 2023. That increase would come from having three similar-sized competitors in the market having to invest more in their networks to remain competitive.
“With the merger, the new company would be better positioned for a convergence play, growth in automotive, and other high mobility/broad coverage 5G use cases, with new strength in wholesale and enterprise and positioning for network-as-a-service (NaaS) with 5G network slicing,” said Strategy Analytics Director Susan Welsh de Grimaldo as part of the report.